MACRO

ANLYSIS OF INDIAN INSURANCE SECTOR AND MARKETING OF ICICI PRUDENTIAL PRODUCTS

With reference to karvy consultancies

A summer training project report submitted to fulfill the award of MBA Degree

Submitted by PRATIK J. SHAH BHAVESH C. PATEL VISHAL R. BAROT Roll No. 70 Roll No. 42 Roll No. 05

PROJECT AT:

S.K.PATEL INSTITUTE OF MANAGEMENT & COMPUTER STUDIES GHANDHINAGAR

Year: JUN 2004

CERTIFICATE
This is to certify that the project work titled MACRO ANLYSIS OF INDIAN INSURANCE SECTOR AND MARKETING OF ICICI PRUDENTIAL PRODUCTS

Is work out by students

PRATIK J. SHAH BHAVESH C. PATEL VISHAL R. BAROT

I certify that the candidates have successfully completed their work in course of time in summer training project.
Date: Sign of project guide
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ACKNOWLEDGMENT

Sincere thanks to ICICI Prudential and Karvy Groups Ltd. For giving us an opportunity for working on this project which in turn helped us having an overview of the insurance industry in general and ICICI Prudential Life Insurance Company Ltd. We are also thankful to karvy management for providing the required peripheral facilities. This project will make a considerable impact on the future scopes of our placement and also provide enough experience of working with an organization. We also contributed to the selling of the insurance products for the ICICI prudential with great help form them for providing special product training and equipments provided for sales.

-Thank you

INDEX
Project Theme Chapter I Chapter II Chapter III Chapter IV Chapter V Chapter VI Section VII Bibliography Fundamental of Insurance Insurance Industry: Phases from Origin to Growth Nationalized Players: LIC Winds of Change: Privatization Nationalized Player Vs Private Players My Experience and Contribution During my summer training Conclusion 5 6 14 19 21 46 52 57 59

Project Theme
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This project was made with an objective to provide a general idea about the Indian insurance sector (Especially todays environment when many private insurance companies in the Indian market). And specially emphasizing on ICICI Prudential on which we have taken our summer training. Our work was divided in two phases. In first phase we were introduced about the general idea of insurance in India, other financial products related to karvy consultancies and special five days product training of ICICI prudential. Second phase was related to practical implementation of the theoretical knowledge we earned. In this phase we went for actual selling in market. Firstly it started form reference market and then leads were provided to us by the telecaller. So here we generated some sales and proved ourselves that, we can be good future employees for the organization.

Chapter 1: Fundamentals Of Insurance

Insure - then you can welcome the unexpected because future rarely comes in neat, predictable packages

What is Insurance?
Insurance is a financial service for collecting the saving of the public and

providing them with a risk coverage. Thus in insurance, The Risk The insured The insurer General definition: In the words of John Magee, Insurance is a plan by which large number of people associate and transfer to the shoulders of all risks that attach to individuals. Contractual definition: In the words of justice Tindall, Insurance is a contract in which a sum of money is paid to the assured as consideration of insurers incurring the risk of paying a large sum upon a given contingency.

Why do you need Insurance cover?

Insurance will help provide protection to investors from certain or uncertain risks. Certain risk includes events like death, retirement, pension, education, marriage, etc. Uncertain risk includes events like theft, accident, fire, ill-health etc. Assets are insured because they are likely to be destroyed or made non functional through an accident occurrence. Such possible occurrences are called perils. Fire, floods, break down, earthquake are perils. The damage that these perils may cause the asset is the risk that the asset is exposed to. The risk only means that there is possibility of loss or damage. It may or may not happen. Yet there is uncertainty about risk. Insurance is done against this contingency. A human life is also an income-generating asset. This asset also can be lost through unexpectedly early death or made non-functional through sickness and disability caused by accident. Accident may or may not happen. Death will happen, but the timing is uncertain. If it happens around the time of retirement, when it could be expected that the income will normally cease or the person could have made some other arrangement to meet the continuing needs. But if it happens much earlier when the alternative arrangements are not in place, insurance is necessary to help those dependent on income. In case of a human being, he may have made arrangements for his need after his retirement. These would have been made on the basis of some expectations like he may live for another 15 years or that his children will look after him. If any of these expectations would become inadequate and there could be difficulties. Living too long can be as much a problem as dying too young. These are risks, which need to be safeguard against thorough insurance. Satisfaction of economic needs require generation of income from some sources. If the property, which is the source of income, is lost fully or partially,
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permanently or temporarily, the income too will stop. The purpose of insurance is to safeguard against such misfortunes by making good the losses of the unfortunate few through the help of the fortunate many who were exposed to the same risk but saved from the misfortune. Thus the essence of insurance is to share the losses and substitute certainty by uncertainty. The concept of insurance has been extended beyond the coverage of tangible assets. An exporter runs the risk of the importers in the other country defaulting as well as loses due to sudden changes in currency exchange rates, economic policies or political disturbances. These risk are now insured. Doctors run the risk of being charged with negligence and subsequently liability for damages. The amount in question can be fairly large beyond the capacity of individuals to bear. These are insured. In some countries the voice of a singer may be insured though benefit of spread is not available in these cases. Thus, insurance is extended to intangibles. For multinational corporations political risk is one of the many factors that need to be assessed and manage throughout the life time of an oversees project and Investment. These investments related exposure can be covered by a confiscation, expropriation and nationalization programme which will insure a permanent investment outside a companys home base operation. Other objectives of insurance could be: Family of insured is protected. Provision of retirement and old age To provide funds for education, marriage, ill-health To get tax relief from income tax and wealth tax, the premium paid as well as the sum assured To cover the risk from theft, burglary, accident, fire etc

Business of Insurance
Business of Insurance is done by Insurance companies- called Insurer. Insurer brings together persons with common insurance interest or
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who are sharing common risk called Insured. Insurer collects the share of contribution called premium from all of them and pay compensation called Claim to those who suffer. The business of Insurance is nothing but one of the sharing. It spreads the loss of an individual over the group of individuals who suffer common risk People who suffered loss get relief because their loss is made good. People who do not suffer loss are relieved because they were spread the loss. The insurer is in position of trustee as it is managing the common fund for and on behalf of the community. It has to ensure that nobody is allowed to take undue advantage of the arrangement. That is to say that the management of business requires care to prevent entry into the group of people whose risk are not of the same kind as well as playing claims in losses that are not accidental.

Categories Of Insurance
Insurance

The following are major categories of Insurance

Life

Health Medical

General

Endowment

Whole Life

Mutual fund return And risk coverage partially

Pension/Annuity contracts with profit or Without profit for fixed amounts on maturity

General Structure of Insurance Market

Buyers:
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It includes individuals, commercial & industrial organizations who are exposed to risk and uncertainties and want to safeguard their interest. Intermediaries: Insurance Agent: An Insurance agent is a person who works for insurer. His job is to bring in customer for the insurance company. He is remunerated in the form of commission expressed as a percentage of premiums payable on the business introduced. Insurance Broker: A broker is an individual or a firm whose full time occupation is the placement of insurance business with insurance companies. An Insurance Booker is deemed to be an independent profession. The broker receives brokerage expressed as a % of premiums from the insurer. In India broker has been absent in insurance market except those operating internationally especially in Reinsurance field. Insurance Consultant:

There are large numbers of Insurance consultant in Insurance Industry who advise the insured in a manner similar to that of broker or an agent. He will be remunerated by the customer and not from the insurer for providing this service. So far law in India does not require such Insurance consultant to be registered under the law . The home service representative: Industrial Life Assurance business requires service of these representatives to call at home of the policyholders to collect the weekly/monthly premium and hopefully to sell further policies. This business is not being transected in India, however it is used extensively in developed countries.
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 Reinsurance Broker The transaction of reinsurance business is commonly done with the help of Reinsurance Broker who brings the buyer and seller together. Buyer is the insurer, which has business in excess of its capacity, and seller is the insurer, which has spar capacity to take the business that is offered to it. Insurance companies: These are the institution, which provides insurance to the buyers. They approach to the customers either directly or through agents and brokers. There are several such different organizations for insurers. The insurance law normally provides guidelines about the minimum requirement for such institutions. In India, insurance companies are subject to be governed by IRDA.

KARVY CONSULTANCIES LTD.

KARVY CONSULTANCIES LTD is Ahmedabad based company

where I have undergone my summer training. Karvy is basically a group of companies in the business of financial products. Its head office is located at Hyderabad. Karvys network includes 25 branches all over India, 14 Investors point and it has more than 5500 Sub broker and agents with it.

Karvy Groups includes four different types of functional areas as stated below.
Karvy Consultants Limited

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 Transfer agency services for corporate & mutual funds Registrar for IPO / book building Depository Participant services Registered with both NSDL / CDSL IT enabled services MT/call center / data classification Karvy.com a comprehensive financial advisory site Karvy Investor Services Limited Merchant banking & corporate finance Distribution of fixed income and other financial products Karvy Securities Limited Distribution of equity & other financial products
Member - Hyderabad Stock Exchange (HSE)

Karvy Stock Broking Limited Secondary market trading

Member - National Stock Exchange (NSE)

Trading through BSE

I nsurance has become Sine quo non-in todays environment, where the Indian consumer is savoring a variety of products and services. To maintain a life style, many of us take on loans and other facilities and other financial products, sometimes far in excess of our incomes. Think of a situation where a couple works hard for 10
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years to set aside money for their dream house and house is destroyed in a fore or an earthquake. Can they ever build it? Yes if they are adequately insured. To cater to such needs, insurance have introduced a range of new products. Today you have insurance products that will cover the risk to your life, your house hold belongings, and even your pets, and provide you professional indemnity or protect you against product liability.

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Chapter 2: Insurance Industry: Phases from Origin To Growth

The evolution of Indian insurance industry has reached a full circle Insurance Industry: Phases from Origin To Growth India is witnessing its insurance industry take a full turn, Privatization to Nationalizations and back to Privatization. The Indian Life Insurance sector, which was dominated by private players, was nationalized in 1956 and The Life Insurance Corporation of India was formed. The Non-life insurance business was nationalized in 1972 under the aegis of General Insurance Corporation, which established four subsidiaries who would compete among themselves! And now the government intends to give both the LIC and the GIC some real competition by privatizing the insurance sector. As the doors are being opened, Insurers worldwide are spreading wings to have a bite in the vast Indian Insurance pie. Lets have a tour to the insurance sector from the inception stage to the present developments and look into the probable future. Insurance in the modern form originated in the Mediterranean during 13/14th century. The earliest references to insurance have been found in Babylonia, the Greeks and the Romans. The use of insurance appeared in the account of North Italian merchant banks who then dominated the international trade in Europe at that time. Marine insurance is the oldest form of insurance followed by life insurance and fire insurance.
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Life Insurance in India

The early developments of life insurance were closely linked with that of marine insurance. The first insurers of life were the marine insurance underwriters who started issuing life insurance policies on the life of master and crew of the ship, and the merchants. The early insurance contracts took the nature of policies for a short period only. The underwriters issued annuities and pension for a fixed period or for life to provide relief to widows on the death of their husbands. The first life insurance policy was issued on 18th June 1583, on the life of William Gibbons for a period of 12 months. It was in the eighteenth century, societies began to be formed for issuing life insurance policies. Among such societies the Amicable Society (1705), The Equitable Life Assurance Society (1762), the West Minister Society (1792) was the important societies. The premium rates were varied in view of reputation and the health condition of the insured. The British companies started life insurance business in India, by issuing policies exclusively on the lives of European soldiers and civilians. They sometimes issued policies on the lives of Indians by charging extra. Different insurance companies like Bombay Insurance Company LTD. (1793) and Oriental Life Assurance Company (1818) was formed to issue life assurance policies in India. Gradually, the first Indian Company named as Bombay Mutual Life Insurance Society Ltd. was formed in Dec. 1870. During the period from 1870 to 1900, a large number of Indian companies were formed under the Indian Companies Act, 1866. The business was confined to few communities and occupations only. During the period from 1900 to 1912, the insurance business attracted attention among middle class people. As a result, Government of India passed the Insurance Act on the model of British Assurance Act. During the period from 1912-1930, the insurance business witnessed a set back.

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After several changes have been made for the period from 1930 to 1938, the Government of India passed Insurance Act, 1938. The act still applies to all kinds of insurance business by instituting necessary amendments from time to time. By 1956, 154 Indian insurers, 16 foreign insurers and 75 provident societies were carrying on life insurance business in India. At that time life insurance business was concentrated in urban areas and confined to the higher strata of the society. January 1956 the management of life insurance business of 245 Indian and foreign insurers and provident societies were taken over by the central Government with a capital contribution of Rs.50 mn, and than nationalized on 1 st September 1956 in the Parliament an Life Insurance Corporation (LIC). The Indian insurance market was restricted sector. Only two government giants namely LIC & GIC ruled it till it was set open to the private players. The Narasimha Rao government unleashed liberal changes in Indias rigid economic sector. The Rao government appointed a Committee of Reforms in the Insurance sector in April 1993 under the chairmanship of R.N. Malhotra. The insurance Regulatory Authority was set up. After over five years Insurance Regulatory & Development Authority (IRDA) Act, 1999 could be passed by the Parliament During November 1999. IRDA open its window for Application for giving new licenses to the prospective players on 16th August, 2000.

To sum up Inception to Growth stage of Insurance in India:

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 1818: Europeans started Oriental life Insurance company in Kolkata 1870: First Indian Insurance company: Bombay Mutual Life Insurance 1912: First Indian Insurance Act was passed. 1938: Indian Insurance Act was reenacted in present form 1956: Life Insurance business of 245 private operators was taken over by Government. Life Insurance Corporation of India was established 1999:Insurance Regulatory and Development Authority bill was passed in Parliament in December 1999. 2000: IRDA, independent insurance authority like SEBI established in April 2000. Private insurance companies are allowed since September 2000.

The following players have applied and some have got licenses and even started operations in India.

Indian Partner HDFC Reliance

Foreign Partner Standard life UK No Partner

Specialization Life Non-life

Present Status In operation Operation to begin shortly

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Sundaram Max India Bajaj Auto Kotak Mahindra ICICI ICICI IFFCO

Royal & Sun Alliance New York Life Allianz Old Mutual south Prudential, UK

Non-life Life Non-life and Life Life Life

In operation In operation Applied for licence Started operation In Operation Applied for licence Received Licence In operation In operation Received licence Received licence To apply To apply.

Tata group Aditya Group SBI Vysya Bank Dabur Hero Group Punjab

Lombard Non-Life Tokiyo Marin, Non-life Japan AIG, USA Life, Non-life Birla Sun life Life Cardif france ING CGNU, UK + Zurich Life Life Life Life, Non-life

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Chapter: 3 Nationalized Player:

Rescue your dreams

Life Insurance Corporation Prior to 1956, 154 Indian insurers, 16 foreign insurers and 75 provident societies were carrying on life insurance business in India. At that time life insurance business was concentrated only in urban areas and confined to the higher strata of the society. The GOI nationalized these 245 Indian and foreign insurers and provident societies with a capital contribution of Rs.50 million. And this is a story behind the genies of the Indian Insurance giant Life Insurance Corporation Of India, which ruled the Indian insurance sector for almost 50 years. Life Insurance Corporation ensures and enhances the quality of life of people through financial security by providing Life Insurance products and services of high quality, and by providing resources for economic development.

The objectives of LIC is as follows:

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Spread Life Insurance; provide life insurance protection to the masses at reasonable cost. Maximize mobilization of people's savings by making insurance-linked savings adequately attractive. To invest funds to serve the best interests of both the policy holders and the nation Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders. Act as trustees of the insured public in their individual and collective capacities. Meet the various life insurance needs of the community that would arise in the changing social and economic environment. Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy. Promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards achievement of Corporate Objective.

Since 1956 LIC had a monopoly of life insurance business in India till the privatization of the sector.

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Chapter 4. Winds of Change: Privatization

Need for privatization Prerequisites New Entrants & Likely Players What privatization will bring with it?
Smell the cheese often so that you can know when it is getting old.

Need for privatization

Liberalistion and reforms have the potential to change the complexion of an industry. The Indian insurance is no exception. In bid to make it more effective, the government has opened up insurance sector for private players. Let us see rationale for opening up an insurance sector in India. Untapped Potential Life Insurance: India has an amorphous middle-class of about 300 million people who can afford to buy life, health, and disability and pension plan products. Out of this only 20% have insurance -and that too covers only 25% of their needs and financial capacity. The remaining 80% have no insurance cover. The life insurance market of India, therefore, is practically untapped. The low level of penetration of life insurance in India compared to other developed nations can be judged by a comparison of per capita life premium.

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Country Japan UK USA India

Life Premium Per Capita US $ in 1994 3,817 1,280 964 4

4000 3500 3000 2500 2000 1500 1000 500 0 Japan UK USA India Life Premium Per Capita US $ in 1994

Clearly, there is considerable scope to raise per capita life premium if the market is effectively tapped. With an insurable population of 300 million, per capita life premium can be raised to a level of US $ 200 - $300 and hence the market can expand by 50 to 75 times over the existing size through the extensive and efficient reach to this untapped area by private players. The insurance business in India is pegged at $6.6 billion whereas industry leaders feel privatization would open up as much as $26 billion. Motor Insurance: The story of motor insurance is no different. Only about 60% of motor vehicles and only 46% of two wheelers are insured. All these are sure indicator of the untapped potential in the Indian insurance industry.
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 Untapped Rural Potential: Huge rural segment is another instance of untapped potential. Rural Indias contribution is just 54.7% of total LIC policies and 47% of LICs total sum assured during 1998-99. This is when the rural population constitutes 74.3% of countrys population. Growing Need For insurance: In India, insurance is traditionally considered as an instrument of savings. The potential of insurance products as riskcompensators has always been underemphasized. According to finding of an LIC survey as many as 40% of insurance buyers consider insurance products avenue for compulsory savings. Only 26% see insurance as old age pension while just about 18% consider insurance a provision for risk and uncertainties. This trend is in for a change soon. Now customers prefer more options. They want not just basic insurance products but investment based insurance products, pension products and health care products as well. Factors such as increasing life expectancy, disintegration of the traditional joint family system and rising cost of health care are bound to make market clamour for variety of insurance products with need based features. Life expectancy, which was just 32 years during fifties moved up to an average of 61 years during 1996-97. The result: a long retired life. Naturally, there is an increasing need for pension insurance products.

Poor Customer Service: Most agents and Business development officers are interested only in procuring new business. Servicing existing customers satisfactorily has not been a priority for them. The reason could be incentives are based on new business generation and not in satisfactory servicing of existing customers. Moreover LIC and GIC have no tied agents.

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Even Existing agents are not buyer-friendly. They are always desperate to fulfill their quotas of business and have little time to explain policy features to prospective customers. More than 10% of LIC policies are surrendered or get elapsed every year. Privatization will create competitive environment and provide customer friendly services. High Premium: There are host of factors that have caused insurance potential to remain untapped. High insurance premium is one of them. Indian insurance companies are too slow in revising their premium. Currently LIC premium are determined by macro inputs related to the years between 1991 and 1996. The last time LIC revised its premium, was after a gap of 12 years. Ditto for general insurance. There is no proper research in clams and this premium are not scientifically determined. Low investment yield: Inefficient asset management and low investment yield are also responsible factors, which drive us towards privatization. On an average LIC could generate a yield of just 12.37% on its investment during 1997-98. During 1998-99 the figure was still lower at 11.96%. Investment restrictions have been responsible for low yields. LIC has to invest not less than 20% of its fund in central govt. securities, a minimum of 5% in the national Housing bank, not less than 25% in the state govt. securities including govt.-guaranteed marketable securities, and a minimum of 25% in the social sector. The remaining 25% can be invested in private sector and in loans to policyholders. GIC has its own restrictions in investment. It has to invest a minimum of 25% in central govt. securities; a minimum of 10% in state govt. and PSU securities, a minimum of 35% in loans to state govt., HUDCO and DDA, for housing projects and the remaining 30% can be invested in equities, term loan and debentures. No doubt, investment restrictions are there. But, LIC and GIC can enhance investment yields within the ambit o these restrictions by being more proactive
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in managing their investment. What they do is invest and then sit back. They do not trade in the securities they have invested in. To summarize we can say that, Insurance penetration is low. Insurance awareness is low. Insurance covers are expensive. Returns from insurance products are low. Marketing network is weak. Training of agents is woefully inadequate. Insurance products offered by public players are not customer friendly. They create products and go out to find customers. They do not create products that the market wants. There is dearth of innovative and buyer friendly products Opening of Indian insurance sector promises a drop in premium, improved Services, development of need based product and deeper penetration of insurance.

Prerequisites For Entering into insurance

Any private player wants to enter insurance sector has to comply with the following requirement without which it will not be considered eligible for obtaining license.

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 Minimum capita requirements: The private sector is allowed to enter insurance industry. The minimum paid-up capital for new entrants is mentioned below. Minimum paid-up capital for life and non-life insurance companies of Rs 1 billion Minimum paid up capital for reinsurance companies is Rs 2 billion. Share Holding: The promoters' holding in private insurance company should not exceed 40% and should, at no time, be less than 26% of the total paid-up capital. No person other than the promoters should be allowed to hold more than 1% of the equity. Entry of Foreign Players: If and when entry of foreign insurance companies is permitted, they have to enter the market by way of joint venture with Indian partners. Equity Participation for Joint Venture: It is proposed that in the private insurance joint venture, the Indian promoter will come to hold 74 per cent stake in the venture initially, leaving the foreign partner with 26 per cent. It is also proposed that the Indian promoter will have to mandatory lower its stake in the private insurance firm from the initial 74 per cent to 26 per cent in a period of ten years.

Minimum Rural Business: New entrants in life insurance should be required to transact a certain minimum business in rural areas. It should be ensured that such insurers do not avoid writing small policies. Similarly, new general insurers should also write a certain minimum rural non-traditional business.
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 Those who fail to comply with these stipulations should be subject to a penal assessment by the Insurance Regulatory Authority. Requirements for Financial Institutions The RBI has stipulated that a minimum of 15% of Capital Adequacy Ratio for FI to enter in insurance sector. The NPA should not be more than 5% of the total out standing and advances of the institutions.

Private Players in the Market

Following the entry of new private players back in the early 21 st century, virtually every man, woman and child in the country know the importance of insurance and total risk protection. The new entrants into the Indian insurance sector are able to press upon the eminent need for individuals to buy insurance. Facilitating the customer has been their motto and this has been reflected in the product features, service and means of collecting premiums. Walk into any super market, Bank post

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office, ATM, Internet Kiosk, or departmental store today, insurance is the highest selling product. The Private players are confident that they will be able to make inroads into this segment on the basis of better services, returns and tailor made insurance schemes. The result is newer products in the form of better services for customers. In course of time, plain vanilla policies offering the standard coverage will give way to a varied range of polices, tailored to suit different needs and situations. After all, it is the servicing of a product that distinguishes an insurance company. New players are offering flexibility to the customers in terms of the choice of features instead of the standard policies. Thus the life insurance and General insurance monopoly enjoyed by the public sector is being challenged now.

A joint venture between ICICI, one of Indias leading financial institutions and PRUDENTIAL, one of the worlds largest life insurance companies. Today ICICI Prudential is the leading private life insurance company in India. Initial Capital base: Rs.150 crores. ICICI Prudential insures one life every 3 minutes!
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 PARENTAGE:

ICICI Bank
About ICICI, ICICI Limited, one of India's largest financial services provider was formed in 1955 and is enjoying a one-year more experience than LIC. At the initiative of the World Bank, the Government of India and representatives of Indian industry, with the objective of creating a development financial institution. Over the last four decades, ICICI has stretched the borders of its business to evolve from a traditional project finance institution to a diversified financial services group providing a broad spectrum of financial solutions to corporate and retail customers. ICICI today operates as a virtual universal bank with a network of 27 subsidiaries. At year-end fiscal 2000, ICICI had assets of about Rs. 650 billion (Rs. 781 billion as per US GAAP) and stockholders equity of Rs. 93.3 billion (Rs. 70.8 billion as per US GAAP). The net profit for fiscal 2000 was Rs. 12.06 billion (Rs. 9.33 billion as per US GAAP).

ICICI Bank is one of Indias largest financial service providers. It has evolved from being a traditional development finance institution to a financial conglomerate providing a spectrum of financial solution to corporate as well as retail clients. ICICI is Indian Origin Company with the strong brand image of 47 years. ICICI Bank is having an asset of Rs. 1,00,000 crores + Better than sovereign rating (Moodys) First Indian company to be listed on New York Stock Exchange. Highest rating of AAA by CRISIL.
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CREDIT RATINGS Agency India ICICI Limited Moody's FC - Long Term Ba2 Ba1 FC - Long Term BB BB S&P FC - Short Term BB B JCRA FC - Long Term(Senior) BBB BBB R & I Inc. FC - Long Term BBB BBBRupee - Long Term Care - AAA Care - AAA CARE Rupee - Short Term PR1+ Rupee - Long Term LAAA LAAA ICRA Rupee - Short Term A1+

Moody's: Moody's Investor Services S & P: Standard & Poors JCRA: Japanese Credit Rating Agency R & I Inc.: Rating and Investment CARE: Credit Analysis & Research Limited, India ICRA: Investment Information & Credit Rating Agency Limited, India FC : Foreign Currency

Prudential
About Prudential, Founded in London in 1848, Prudential plc is one of the largest life insurance and retail mutual funds company in the United Kingdom with over US$ 270 billion in funds under management worldwide. With a network of over 26,000 agents and staff, Prudential has life insurance and mutual fund operations/offices in 11 markets in Asia (not including India). Prudential has started operations in 1848 in UK. Prudential is one of the largest life insurance and mutual funds company in the world. It has a presence in over 15 countries and caters to the financial needs of over 10 million customers.
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 Investor deposit base in UK alone exceeds Rs. 53,200 crores. It has solid reputation build over 150 years. Already established as one of the biggest mutual fund companies in India (Prudential ICICI AMC) INDIAN PLANS: The Company has launched six schemes till date. It has a presence in 7 cities. The company has sold 6387 schemes with a total sum assured of over Rs.100 crores. USP: The Company is backed by the string credentials of parent and enjoys strong brand equity. Both these factors have worked to their advantage. Its experience as professional fund manager has proved to be very beneficial. Service standard and stability of returns work as U.S.P. for company. PUNCH LINE: We cover you at every step in life

MARKETING STRATEGIES
ICICI Prudential - Internal Marketing To achieve customer satisfaction, the ICICI Prudential striving at the following: 1) 2) 3) 4) Training employees effectively who come in direct contact with the customers. Motivating the employees. Creating effective support systems, training and motivating the employees who man these support systems. Ensuring that the service providers and support providers work like an ICICI Pru team.

THE 4 Rs

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Applying market dynamics to insurance and pension plans, what the marketer and the marketing apparatus can possibly do are enumerated below. Adding new customers and penetrating new markets is a sine queue known for marketing organization. The era of marketing is of providing solutions to the customers. Making his life simpler delighting and surprising is to the level of the customers expectations. A satisfied customer is the ultimate goal of ICICI Pru.

A careful examination of the market situation would help us in getting a better understanding of the process. 1) Retention of customers. 2) Getting Repeat business from customers.

3) More Referral from existing customers. 4) Creating Relationship with the customers.

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Joint Venture: It is a joint venture between Kotak Mahindra Group and Old Mutual Plc, London. Initial Capital base: Rs. 125 crores About Partners: Kotak Mahindra Group is one of the healthiest finance companies in the country. It has net worth of Rs. 500 crores and has offices spread across 40 cities. Old Mutual Plc is an international finance service group based in London with expanding operations in life insurance, asset management, banking and general insurance. It has an experience of 156 years in the life insurance business.

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Indian Plans: OM Kotak Mahindra life insurance has operations in seven cities and has set a target of 13 cities by the end of this year. The company has targeted sales of approximately 30,000 policies in the first year of operations. AD Line: Jeene ki Azadi

Joint Venture: It is a joint venture between Housing Development Finance Company and UK based standard life. Initial Capital base: Rs. 168 crores About Partners: HDFC is Indias largest mortgage finance company. Besides home loans, it offers investment and saving opportunities for households. Head office in Mumbai, the company has offices in 98 locations across India and serves customers in over 2400 cities and towns. Standard Life is Europes largest mutual life company. It is one of the few insurance companies in the world to be awarded AAA rating by two leading credit rating institutions, Moodys and Standard and Poors. Indian Plans: Currently company has three basic products available in the 11 cities. It hopes to launch more products and reach out to more cities by the end of the year.
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 AD Line: Making life easier for you

Joint Venture: It is joint venture between Aditya Vikram Birla Group and Sun life Financial of Canada. Initial Capital base: Rs. 120 crores About Partners: Aditya Vikram Birla Group, headed by Kumarmangalam Birla, is one of the largest Indian conglomerates with turnover of Rs. 26,000 crores. With business interests ranging from Viscose filament yarn to aluminum, cement and textiles, the group has an asset based of over Rs. 18000 crores. Sun life financial group provides financial solutions in the area of life and health insurance, pension funds, investment, brokerage and banking. It insurance business has been rated AA+ by Standard and Poor for financial strength and AAA1 for claims paying ability by Fitch. Indian Plans: The Company has launched three schemes till date. It has a presence in five cities and sells through its dedicated individual agents and corporate agents. The company has sold 3000 schemes to individuals with premiums totaling Rs. 3 crores. U.S.P. The company is bringing in customer-orientation by maintaining individual customer accounts. It is focusing on technology to serve customers better. It is trying to switch insurance selling from tax based to a need-based one. The company also charges lesser premium for female lives in recognition of better mortality rate among women.

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 AD Line: Your dreams our commitment

Joint venture: It is JV between Vyasa Bank and ING group and GMR group Initial Capital: Rs. 125 crores About partners: Vyasa bank is south India based bank. With 481 retail outlets, it has string presence in Karnataka, Kerala, A.P. and Tamil Nadu ING group is the largest life and health insurance company in the world. It offers wide range of financial services including insurance, banking and asset management. GMR has a track record of over decades with interest in areas like power generation, infrastructure etc. Indian Plans: It has around 260 advisors and intends to strengthen it to 1500 advisors.

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Tata AIG life insurance Limited

Joint Venture: It is a joint venture between Tata group and American International Group inc. Initial Capital: Rs.125 crores. About Partners: Tata Group is most respected industrial conglomerate in India with revenue of more than $ 8 billion. It has been market leader in steel, commercial vehicles, electric power generation in the private sector and computer software. AIG is the leading US based international insurance and financial service provider and the largest underwriter of commercial and industrial insurance in the US. Indian Plans: It plans to provide life and general insurance solution to individual and corporate. U.S.P. It considers its U.S.P. as high quality of service offered to customers. It more emphasis on pull strategy by providing services through call centers. Ad line: With You Always

SBI life insurance

Joint venture: It is a joint venture between SBI and Cardif of France. Initial Capital: Rs. 125 crores About partners:

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SBI is indias largest public sector band having the branch network of 14000. Cardif is a wholly owned subsidiary of BNP paribas, one of the top 10 bands in the world and third largest in Europe.

Max New York Life

Joint Venture: Max New York life is a joint venture between Max India Limited and New York life, US. Initial Capital base: Rs.200 crores About Partners: Max India is a leading Indian company with diversified business interests. It is primarily into the business of pharmaceuticals, metallised plastic films and BOPP films for the flexible packaging industry. New York Life is a fortune 100 company and claims to be one of the largest provider of life insurance coverage in America. The company has over 155 years of experience. Indian Plans: Max New York Life has launched its products in nine cities across India. The company markets its five products through life insurance agents and advisor. U.S.P. The company aims to provide comprehensive risk protection in a country where a sizable portion of the population of the country is either uninsured or under-insured. It has policy, which offer customers a choice between products that are oriented towards risk protection or savings. It has vision to be the most admired life insurance company in India.
Ad line: Your Partner for Life

What privatization will bring with it?

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The insurance industry is a key component of the financial infrastructure of any economy. Opening up of insurance sector is an attempt to make the insurance sector more dynamic. Post opening of the insurance sector in India, competition will cause the market to grow beyond the current rates, creating a bigger pie and will offer additional consumer choices through the introduction of new products, services and price options. While competition in insurance is one aspect of the post liberalization scenario, the other aspect would be the public and private sector companies working together to ensure the healthy growth and development of the sector. Let us glance through what impacts privatization will have on Indian Insurance Sector. Market penetration through increasing awareness LIC was having about 80 products to offer but investors knew about only a handful. Companies offering general insurance products like medical, housing, motor and industrial insurance were having more than 150 products to sell but the awareness was even less than LIC products. Till now public insurance had failed to educate the customers about the products, and agents had little incentives to market them aggressively as they had very low commission. But now, sector has been opened up for private and foreign players. These deep pocket players have extensively launched advertisement and promotional campaign. It has resulted into hype and awareness about insurance products and ultimately turned into increase sales of insurance policies.

Rural Market Penetration A large segment of rural incomes are not reflected in the growth of insurance premium, as there is no marketing of products to this segment. After liberalization of insurance sector, it has been made mandatory that new entrants
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in life insurance should be required to transact a certain minimum business in rural areas. It will be ensured that such insurers do not avoid writing small policies. Similarly, new general insurers should also write a certain minimum rural non-traditional business. It will help to cover rural untapped market. Distribution channels Insurance companies will also get savvy in distribution. Enhanced marketing thus will be crucial. Already many companies have full operation capabilities over a 12-hour period. Facilities such as customer service center are already into 24-hour mode. It has helped distribution network became efficient. Premium as a % of GDP will increase. India has traditionally been a highly savings oriented country - often described as being on par with the thrifty Japan. If the insurance market is properly tapped, it is possible to raise life premium as a percentage of GDP from the existing level of 1.29% to 10% - on par with Japan. This will bring an eight-fold increase in the existing volume of life premium.

Premium as a % of GDS will increase. Life premium as a percentage of GDS (gross domestic saving) is very low in India as the following comparative data adequately demonstrates.

Country UK S. Africa Japan France US S. Korea India

Life Premium as % of GDS in 1994 52.50 51.55 32.46 26.20 25.20 21.92 5.95
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60 50 40 30 20 10 0 % of GDS in 1994 UK South Africa Japan France US South Korea India

It is possible to raise life premium as a percentage of GDS in India from the existing levels. Entry of players will be able to effectively exploit the potential by creating and marketing attractive insurance products with high rates of return on premium investments. This would help deepen the market as the same family could opt for different schemes catering to different needs.

Fetch Foreign Investment As the Government has opened up doors for foreign players in Insurance sector, insurers worldwide are spreading wings to have a bite in the vast and untapped Indian Insurance pie. Foreign investors through joint venture with Indian partners can invest up to 26% of total paid up capital. It had given positive signals to foreign investors and huge funds can be garnered after liberalization of insurance sector. It will help the country to accomplish it dire need of long-term funds for investment in infrastructure, information technology and other sectors, Development of Innovative and Need based products.
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The customer wants insurance products with need-based features. Apart from the plain vanilla policies, new entrants will also offer consumers a choice of products with low premiums. The customers will get insurance products that suit their specific needs. Insurance companies will introduce more term policies. These policies provide protection for a specified time period, and do not offer any returns. These will cover simple requirements of the insurance for the investor. In effect term policies translates into low premium outgo, which frees the capital for investment into other investment vehicles, which offer better returns. Apart from term policies, Endowment policies will change too. The insurer, in line with his precise risk appetite, will be able to invest in a variety of indices or sector specific where in the returns would be higher. Instead of current fixed returns schemes insurance companies will issue unit linked schemes, indexed funds, or even real estate funds. Another opportunity is offered by a pension contract. Here the options offered could be indexed annuity, immediate annuity or a deferred annuity. The scope of new products is also immense in the non-life segment. Companies would offer products for niche segment, like disability products, workers compensation insurance, renter's coverage and employment practices liability insurance. Competition will bring quality of service In the insurance sector, entry of technology and high competition imposed by private players has given a different dimension to industry. LIC and GIC are going to face a tough competition. All this will eventually increase the comfort levels of the consumer vis--vis insurance. Long relegated to being sellers market the insurance sector will be driven by buyers and the greater flexibility and options that lie in store will encourage the investor to plan for the rainy days. Reliable customer services through trained life advisors

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Prior to liberalization, Life and General Insurance agents were not required to possess minimum qualification in terms of insurance knowledge. Now it has been made mandatory to take insurance training of at least 100 hours to be an agent. Thus these trained agents would help and advise the customers to provide them suitable option to their requirement and need. To summarize we can say that entry of private players are likely to bring following changes. Insurance products to suit specific needs of customers will be available. Customization of products will be more common. Commoditiser insurance products will be just a phone call away. Computerizations will reduce administrative expenses. Distribution channels will become more effective. Premium will be market driven and will be based on records of past claim. Settlement of claim will be accurate and faster. Premiums will deep and service standard will improve. Proactive asset fund management will emerge. This should result in better yield for the private players. It will also bring updated technology, efficient management and a healthy business culture.

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Chapter 5: Nationalized Player Vs Private players

Comparative Analysis
Tough Times never last but tough people do.

Comparative Analysis: Private Players Vs Nationalized Players

This project cannot serve its purpose without a comparison between the long existing public players and the newly entered private players. We need to compare them in terms of what they have, how they are going to deliver it. Thus we have compared nationalized players with new entrant on following ground. Product Comparison Capital Investment Branch Network Distribution Network Number of policies sold and premium collected.

Product Comparison:
From the inception to its liberalization and entrance of new players, there have been winds of change in the various products of insurance sector.

Challenges Faced by Nationalized Player:

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The stage has been set for a major transformation in Indian insurance sector with the entry of private players in the market. Monopoly enjoyed by nationalized players is being challenged. Whether two giants accept or do not accept, entry of private players has threatened their position. We have tried to work out challenges faced by public players, which has put raised question of their performance in changing situation. Challenges Imposed from private insurance companies Synergy of Experience in Joint Venture:
Indian partner and foreign partner of each joint venture is leader in their respective field. If we look at ICICI prudential, it is a joint venture between ICICI and Prudential Plc. ICICI is amongst Indias largest financial institution and has been providing all services under one roof. While Prudential Plc. is also one of the largest financial services provider of insurance, banking and other financial services. It has strong presence in at least 15 countries.

Presence In Indian Financial System: In most of the cases, the Indian Counter-party of the joint venture is engaged in customer services and that too in financial sector. Hence, they are fully aware off the Indian Financial System. Example of it could be SBI, Vyasa bank, Kotak Mahindra, HDFC, and ICICI etc. Distribution Network: Each of private players has their own distribution channels and has strong hold over it. Starting in 1806, over the years SBI has extended its branch network to 14000 across the India. It can capitalize its existing resources and distribution network to penetrate the market further. Trust of the People:

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Being Market leader in respective field and having good financial image might not create problem of gaining trust of people. Players like SBI, ICICI, Aditya Birla group, Reliance have been in existence for quite long period. Not only these but new generation organizations like Kotak, HDFC and Max India have also been able to get trust and confidence of people. Experience of operation in foreign Market: In most of joint venture, foreign partners have presence in insurance sector, thus venture will get benefit of international experience in financial and insurance market of their oversees partners. Not only this, but latest Marketing, information and Mechanical technology can be availed. Synergy with the existing operations Since, players are starting operations afresh, they still have an upper hand in arranging their infrastructure in such a way that they can reduce fixed expenses and can provide better services.

Apart firm this there are certain other challenges which could be described as follows
Low Rate of Return resulting into unviable products The LIC interest bearing schemes give interest of 9 to 10%. Today, where the interest of even RBI bonds are in the range of 9%. Thus their investment is bearing lower return than their interest payment resulting into negative spread. These schemes have become unviable.

Agents Capabilities and Competence Indian insurance companies are marketing their products in traditional way through agents. Agent force is not qualified and equipped with latest
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technology. Moreover marketing in the new environment shall be a war of information and those will be successful, who has complete knowledge of the products. So training and education of the agents shall be equally necessary as recruitment of qualified agents

With these challenges in mind, we can look at SWOT of public insurance companies

SWOT Analysis
Public players
Strengths
Established Organizational Network of Offices all over India and in all corners, which shall save huge cost of creating infrastructure. LIC has more than 2000 branches where as general insurance companies have more than 4000 companies all over India. Strong Financial Position. Total asset of LIC is Rs.160935.76 crores and a consolidated total asset of GIC is Rs. 48294 mln. Established Brand Experience of 50 years of operating in Indian market.

Weaknesses
Low level of commitment towards customer services Stringent Rules and Regulation Low Flexibility in Products
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 Low yield on investment Non-profitable underwriting

Opportunities
Increasing awareness has helped increase sales of LIC polices after privatization Exploring New Distribution channel Turn towards Professionalism Diversification to other financial services like pension fund, retailing Growing beyond geographical boundaries Entering into Health Care Insurance Products

Threats
Opening up of insurance sector has lead to fierce competition

Service tax of 5% has made saving products of LIC unprofitable

Private Players
Strengths
Flexible products Partners having experience in different markets of the world Synergy with their existing operations

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 Expertise in the field of insurance Professional management Good Customer service

Weakness
Yet to build a brand name Low capital base Yet to build strong distribution network Cannot tap rural market

Opportunity
Untapped market Banks ready to tie up for as a readymade distribution network for a small fee.

Threat
Large distribution network of LIC Decades of experience and brand name of LIC service tax on investments

Chapter 6: Our Experience and Contribution during Summer Training

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 Product Training and Selling skills training Five days of Product training programme was held by ICICI Prudential at C.G.Road center. Professional trainer of ICICI Prudential provided training. The objective behind training was that We could understand the products offering by ICICI Prudential and also develops our selling skills. Which helped us in way of approaching people, way of talking with the client, identifying clients needs and based on that how much risk to be cover, what products should be shown to him, etc. During these five days training we had done role-plays, small presentations and other exercises.

Survey Objective: Objective behind the survey was Indian peoples Investment behavior. Sample size was 100 people Sample also includes the corporate employees and departmental heads.

Survey mainly covers the four Investment options, 1) Insurance 2) Mutual fund 3) Stock broking and Depository Services 4) Fix Deposits

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Inferences

Fix Deposits 22% Insurance 44% Stock broking 15% Mutual Funds 19%

Investment options Insurance Mutual fund Stock Broking Fix Deposits

Result in % 44 19 15 22

Survey result shows that major chunk of the people are investing in the Insurance sector than any other Investment options.

My Market 100 What is it? My Market 100 is a book where we have to feel the names, addresses and contact numbers of the 100 persons that we know well.

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We have undergone an exercise of My Market 100. The exercise was about identifying the prospects. And it can be the group of people who are our natural market Relatives Friends Neighbors Colleagues Existing client base Direct Selling After identifying My Market 100 we had gone for direct selling of ICICI Prudential Insurance products. Direct selling done through following steps. (I) (II) Prospecting and Qualifying (My Market 100) Pre approach

(III) Approach (IV) Presentation (V) Handling of Objections (VI) Closing Prepared a comparison chart of Endowment policies between leading Insurance companies
COMPARISSION OF ENDOWMENT POLICIES BETWEEN LEADING INSURANCE COMPANIES
ICICI PRU BIRLA SUNLIFE HDFC STANDARD TATA AIG
Save 'N' Protect Birla sunlife Flexi save plan Endowment Assurance Assure Golden Years

LIC
Endowment with profit

LIC
Jeevan Mitra Triple cover

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Sum Assured (Rs) Term (years) Premium paying Term (years) Annual premium Death Benefit Minimum cover 8th year of policy 16th year of policy Maturity Benefit Upon maturity Interim benefits (Rs) Rate of return (%) Pre-tax Post-tax

100000 25 25 3668

100000 25 25 4320

100000 25 25 4239

100000 25 25 5568

100000 25 25 4047

100000 25 25 5453

100000 142210 202237

100000 131341 193954

100000 142210 202237

100000 147746 257859

100000 162400 224600

100000 131341 428000

300543
Loan available

222198
Loan available

300543
Loan available

308294

295000

300000

Loan available Loan available Loan available

8.2 9.7

5.2 6.7

7.3 8.7

5.7 7.2

7.5 8.9

5.7 7.1

Ratings Premium Death Benefits Maturity Benefit ROR Total of ratings Composite Rating

1 4 2 1 8 1

4 5 5 5 19 5

3 4 2 3 12 3

6 2 1 4 13 4

2 3 4 2 11 2

5 1 3 4 13 4

NOTE: 1) All the figures mentioned above are for a healthy, 35 year old male and are indicative. 2) Composite ratings details:
Rating 1 2 3 4 5 Explanation Very Good Good Average Poor Very Poor

Inferences

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Comparison of the endowment policy offered by different leading insurance companies yield the result that ICICI Prudential offers the policy of Save N Protect with the highest value to the customers.

Value Addition made to the ICICI Prudential and Karvy consultancies during summer training. Generated a prospect list of around 135 people Total calls made during the training are around 200 Taken an appointment of 90 prospect Sold a policies amounting to Rs. 10,00,000 Few are still in pipeline

Chapter 7: Conclusion
It is just the beginning
Over the years, insurance has acquired various names and definitions. This social device provides financial compensation for misfortunes and securities to masses. Over the years, insurance sector is growing by leaps and bounds. Globally, its growing by approximately 4% every year, with Japan in the highest position.
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Although Indian economy is 5th largest in the world in the terms of purchasing power with 26% saving of GDP, which is pretty high, its insured population is just 7% of the total population of the world. The nationalized companies have not adequately captured this vast gap, especially LIC that has been operating since 1956. Some of the reasons, which can be attributed, are as follows: 1) Illiteracy 2) Documentation problem faced by laymen 3) Lack of awareness 4) Ill-trained personnel Due to all these problems the nationalized sector did very less to combat the crisis. Especially in rural areas, LIC in last decade has evolved a number of products, which however do not suit the needs of the rural areas, though its 50% business comes form rural market. Whereas it could have: 1) Designed products based on rural elite as well as rural household sector 2) Evolve clients and area specific products. But, with the opening up of the economy and the vast unexploited segment, the professionally managed private sector has provided rays of hope. It is found that people are aware about private sector & are appreciating their services. The private sector being more professionally managed could understand the lacuna what people had with nationalized sector. The private players have : 1) Customization 2) Customer care
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3) Personnel care 4) Better service & grievance handling. But the fear of security still looms large among the customer for the private sectors. The private sector, though being new is becoming talk of the town & very soon it may capture a sizeable segment to boast of. On the other hand the nationalized companies, which still have a firm hold on the market can retain their position if they try to learn from their past flaws. Lastly, the insurance industry is a service sector, which contribute nearly 50% to our GDP, so it becomes mandatory for the companies (both nationalized & private) to see that customers dont suffer at the end of the day & that their product benefits their lives.

Bibliography
Newspapers & Magazine Bima Nivesh 2 discontinued Business Standard Insurance Service, Marketing of Financial Services Insurance Indias Growth The Financial Express: Nov, 2003 Freny Patel, Old Shield, New Warriors, Economic Times, Insurance Journal, AMA Library Websites o www.indiainfoline.com o www.google.com o www.bimaonline.com o www.lic-india.com o www.dhan.com o www.walletwatch.com 56

o www.iciciprulife.com

MACRO ANLYSIS OF IDIAN INSURANCE

SECTOR AND MARKETING OF ICICI PRODUCTS

PRUDENTIAL

With reference to karvy consultancies

A summer training project report submitted to fulfill the award of MBA Degree

Submitted by PRATIK J. SHAH BHAVESH C. PATEL VISHAL R. BAROT

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Roll no 70. Roll no 43. Roll no 05.

PROJECT AT:

S.K.PATEL INSTITUTE OF MANAGEMENT & COMPUTER STUDIES GHANDHINAGAR

Year: JUN 2004

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